JOHANNESBURG, Aug 28 (Reuters) - Platinum could push above this week's 23-year peaks on speculative buying, but such prices harm the precious metal's long-term viability, world number two producer Impala Platinum Holdings Ltd (Implats) said on Thursday.
Jewellery buyers were put off by high prices, which reached $712 an ounce on Wednesday and surpassed a previous 23-year high touched in March, as speculators piled into the market.
Car makers, who use the metal in auto catalysts to clean exhaust fumes, were rationing its consumption.
"I think there's some more upside, but we'd prefer to see it a bit lower," Implats Marketing Executive Derek Engelbrecht told Reuters after a results presentation. "We'd be happier with prices around $650 to $675."
Spot platinum was quoted at $709.00/714.00 an ounce at 1450 GMT on Thursday.
Jewellery demand, expecially in China, has been hurt as prices have rocketed around 70 percent since late 2001 on a lack of sufficient metal to satisfy the growing calls for it. Since the start of the year the price has jumped around $100.
Platinum demand for jewellery was expected to decline to 2.67 million ounces this year from 2.85 million in 2002, according to Implats forecasts.
While Chinese jewellery buying has tapered off, players on the Shanghai exchange are still lapping up the metal, even at current high prices, due to the scrapping of valued-added tax (VAT) and reduction of consumption tax, Engelbrecht said.
Over the past 11 trading days, some 44,000 ounces of platinum have been scooped up on the exchange, which only represents a fraction of overall buying in the country, he said.
Automotive use was seen falling this year to 2.46 million ounces from 2.6 million, Implats forecasted.
This would help shave the projected shortfall in 2003, the fourth year of deficits, to 115,000 ounces from 505,000 in 2002.
In the car sector, high platinum prices were starting to spark substitution of cheaper palladium , which trades at around $200, a fraction of its sister metal's price.
This trend would not show up in 2003, when palladium demand from car makers would still fall to 4.34 million ounces from 4.485 million in 2002. But less Russian selling would help cut the palladium surplus to 60,000 ounces from 245,000.
A breakdown of Implats' supply/demand forecasts follows in thousand ounces.
PLATINUM
2003 2002 Demand Automobile 2460 2600 Jewellery 2670 2850 Industrial/ Investment 1620 1620 Total Demand 6750 7070 Total Supply 6635 6565 Net deficit 115 505
PALLADIUM
2003 2002 Demand Automobile 4340 4485 Electronics 805 950 Dental 815 760 Other 650 620 Total Demand 6610 6815 Total Supply 6670 7060 Net surplus 60 245